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Major Purchases
| Term | Definition |
|---|---|
| Acquisition Fee | A non-negotiable, one-time fee charged by lenders to set up a new auto lease, covering administrative costs like credit checks, insurance verification, and document processing. |
| Closed End Lease | A financing arrangement where the lessee makes fixed monthly payments for a vehicle over a set period and returns it at the end, bearing no responsibility for its future resale value |
| Collateral | A valuable asset, such as property, cash, or investments, pledged by a borrower to secure a loan |
| Dealer Incentives | Financial rewards or discounts provided by manufacturers to dealerships to motivate the sale of specific vehicles, often reducing the dealer's acquisition cost |
| Default | The failure to repay a loan or meet the legal terms of a debt agreement, including missed interest or principal payments. |
| Deficiency | The shortfall between what is owed and what is repaid, usually occurring when collateral (like a home or car) is sold for less than the outstanding loan balance |
| Depreciation Fee | An accounting method that spreads the cost of a tangible asset—such as machinery, vehicles, or buildings—over its useful life |
| Early Termination | Ending a contract, such as a lease, loan, or service agreement, before its scheduled maturity date |
| Finance Charge | the total cost of borrowing money, expressed as a dollar amount, which includes interest and any additional fees charged by a lender for extending credit. |
| Fixed Rate Loan | A financing arrangement where the interest rate remains constant throughout the entire loan term or a specific period, ensuring consistent, predictable monthly payments |
| Inception Fees | The upfront costs required to start a lease agreement, commonly for a vehicle, paid at signing |
| Installment Loan | A financing arrangement where a borrower receives a lump sum of money upfront and repays it over a set period through scheduled, fixed payments. |
| Invoice Price | The invoice price is the final amount a buyer pays for goods or services, including any discounts, taxes, and shipping fees. |
| Lease | A contractual agreement where a owner grants a user the right to use an asset, such as equipment, vehicles, or property, for a specific period in exchange for regular payments |
| Lessee | The party in a lease agreement (tenant/renter) who pays for the right to use an asset |
| Lessor | the owner of an asset who grants another party the right to use that asset for a specified period in exchange for regular payments |
| Mileage Allowance | A tax-exempt payment made by employers to employees, or a tax-deductible amount calculated by individuals, for using a personal vehicle for business purposes |
| Mileage Charge | A penalty fee in car leasing or Personal Contract Purchase agreements charged when you exceed a pre-set mileage limit, usually calculated on a per-mile basis at the end of the contract |
| Money Factor | Theinterest rate charged on a car lease, expressed as a small, seemingly insignificant decimal rather than a percentage. |
| MSRP | Manufacturer's Suggested Retail Price, representing the price a manufacturer recommends dealerships sell a new vehicle for. |
| Open End Lease | A financing arrangement where the lessee assumes the risk of the asset's depreciation. |
| Purchase Option | A contractual provision giving a party the right but not the obligation to purchase an asset at a predetermined price within a specific timeframe. |
| Rebates | A return of part of the purchase price, paid back to a buyer after a transaction |
| Residual Value | The estimated worth of a fixed asset at the end of its lease term or useful life |
| Secured Loan | A type of credit backed by a borrower's asset, such as a home, car, or savings account, which serves as collateral. |
| Trade-In Value | The monetary amount a dealership or lender offers for your current vehicle, which is applied directly toward the purchase or lease of a new one. |
| Unsecured Loan | a type of credit that does not require collateral to borrow money. |
| Upside Down | Financial situation that is commonly known as having negative equity or being "underwater" which occurs when you owe more on a loan than the asset is currently worth |
| Variable Rate Loan | A financing product with an interest rate that fluctuates over time based on market benchmarks |
| Warranty | A warranty is a contractual assurance or promise made by a seller to a buyer guaranteeing that specific facts about an asset, company, or product are true and will remain so for a set period. |
Created by:
mshuart26